Reuters: Financial Services and Real Estate: Sun Hung Kai scandal crimps Hong Kong shares' best quarter since 2009

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Sun Hung Kai scandal crimps Hong Kong shares' best quarter since 2009 Mar 30th 2012, 09:05 Fri Mar 30, 2012 5:05am EDT (Updates to close) * HSI down 0.3 pct, up 11.5 pct in Q1 * Shanghai Comp up 0.5 pct, up 2.9 in Q1 * Sun Hung Kai Properties hammered after execs' arrest * Not time to bargain hunt HK property sector: CLSA * Investors cheer ICBC, Bank of China 2011 earnings By Clement Tan HONG KONG, March 30 (Reuters) - Hong Kong shares ended their best quarter in 2-1/2 years with a whimper on Friday, as local property developers slumped after the arrest of the billionaire owners of Sun Hung Kai Properties for alleged corruption. The Hang Seng Index rose 11.5 percent this quarter, its best performance since July-September 2009 as investors piled up on beaten down stocks that took the brunt of a 20 percent slump in 2011. However, the benchmark shed 5.2 percent in March on escalating fears that slowing growth in China may hurt profitability of the mainland companies harder than expected. On Friday, the index closed 0.3 percent lower. Sun Hung Kai Properties (SHKP), Asia's largest property developer by market value, plunged 13.1 percent in almost 28 times its 30-day average volume, but finished off the day's lows, closing at its lowest since early January. Hong Kong's Independent Commission Against Corruption (ICAC) arrested SHKP chairmen Raymond and Thomas Kwok in the biggest investigation since the agency was launched in 1974 to root out what was seen as widespread corruption in the government and police. Almost 100 million SHKP shares exchanged hands on Friday, the most since September 1998, when the physical real estate market in Hong Kong suffered a deep correction. "Investors should think twice about bargain hunting in the stock or other Hong Kong developers, as we believe the dust will take longer to settle," Nicole Wong, CLSA's Hong Kong and China property analyst, said in a note to clients on Friday. Wong added that some funds may be pressured to sell the stock given their corporate governance mandates. The "unprecedented" arrests could raise more doubts on the firm's farmland conversion practices in the New Territories that could affect sector peers involved in similar practices, she wrote in the same note. SHKP's peers in the Hong Kong property sector were also not spared. Henderson Land lost 2.5 percent in almost six times its 30-day average volume, while Sino Land declined 3.6 percent in almost triple its 30-day average volume. ICBC, BANK OF CHINA STRONG AFTER EARNINGS The Hang Seng Index's losses were limited on Friday by strength in two of the "Big Four" Chinese banks that reported favourable fourth quarter earnings late on Thursday. Their gains also helped the Shanghai Composite Index rise 0.5 percent on the day, ahead of a three-day tomb sweeping holiday in the mainland. Trading in Hong Kong will also be interrupted by holidays next Wednesday and Friday. Industrial and Commercial Bank of China (ICBC) gained 1.6 percent in Hong Kong and 1.2 percent in Shanghai while Bank of China rose 1.6 percent in Hong Kong and 2 percent in Shanghai. Both banks reported fourth quarter earnings that were higher than expectations, although non-performing loans increased. The Shanghai Composite Index slid 6.8 percent in March, its worst month since last September as growth concerns escalated. Although up this quarter, it is still the worst performer among major Asian markets this quarter, up 2.9 percent. Chinese fund managers slashed their suggested equity weightings in March to the lowest level in 21 months on fears that China's economic growth would slow sharply while monetary policies would remain tight, a Reuters poll showed on Friday. Underwhelming 2011 corporate earnings have aggravated fears that China's slowing economy could be hurting profitability more than expected, paring the rally this year after a 20 percent decline last year in Hong Kong and 22 percent in Shanghai. According to Thomson Reuters StarMine, of the 64 percent of Chinese companies that have reported earnings so far, 74 percent have missed expectations. Market observers said investors are eyeing 2012 first quarter earnings due in April and the next batch of China data, starting with Beijing's official manufacturing purchasing managers' index (PMI) on Sunday, Last week, the HSBC flash purchasing managers index, the earliest indicator of China's industrial activity, fell back to 48.1 from February's four-month high of 49.6. (Additional reporting by Vikram Subhedar; Editing by Ramya Venugopal) Link this Share this Digg this Email Reprints

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